Frank Witter, Chief Financial Officer of Volkswagen AG, said: “The Volkswagen Group is once again off to a good start this year. The sales revenue performance and earnings growth in the first three months of the current fiscal year are encouraging. The measurement of derivative financial instruments – an item that generally exhibits a high degree of volatility – also had a positive impact on operating profit. Overall, we have to continue to pick up the pace when it comes to our transformation. We are also facing challenges in connection with increasing global economic risks. Nevertheless, we maintain our targets for 2019.”
Brands and Business Fields
Sales revenue of the Volkswagen Passenger Cars brand rose by 7.1 percent to EUR 21.5 billion in the first quarter. Operating profit before special items improved to EUR 921 (879) million. Improvements in mix and price positioning as well as positive cost development compensated for the impact of lower volumes and negative exchange rate effects. In the reporting period, negative special items amounted to EUR 400 million.
At the Audi brand, sales revenue fell to EUR 13.8 (15.3) billion due to, among other things, the new allocation of sales companies. At EUR 1.1 (1.3) billion, operating profit was in line with the previous year. Improvements in the mix and margins as well as positive exchange rates could not compensate for the adverse affects of model launches, phase-outs as part of the product initiative and WLTP-related fluctuations in the portfolio, and higher upfront expenditure for new products and technologies. Effective 2019, the multibrand sales companies have been separated from the Audi brand to increase overall transparency and comparability.
Sales revenue at the ŠKODA brand increased by 8.2 percent to EUR 4.9 (4.5) billion in the reporting period. The operating profit decreased to EUR 410 million. The decline mainly resulted from negative exchange rate effects and cost increases. Meanwhile, volume increases and pricing measures had a positive impact.
Sales revenue at the SEAT brand increased to EUR 3.1 (2.8) billion in the first quarter. Operating profit increased by 5.5 percent to EUR 89 million due to volume and mix effects. This more than offset the negative impact of cost increases.
At the Bentley brand, sales revenue climbed to EUR 456 (351) million in the first quarter. Operating profit improved to EUR 49 (–44) million, which was mainly the result of the availability of the new Bentley Continental GT as well as favorable mix effects and exchange rate trends.
At EUR 5.2 (5.4) billion, sales revenue generated by Porsche Automotive was below the figure for the same period in 2018. Operating profit fell by 11.6 percent to EUR 829 million, due to market and production-related declining volumes.
At EUR 3.3 (2.9) billion, Volkswagen Commercial Vehicles sales revenue was 11.8 percent higher than in the first quarter of 2018. In particular, higher volumes, improvements in the mix and a favorable exchange rate trend led to a 29.9 percent rise in the operating profit to EUR 291 million.
Sales revenue at Scania Vehicles and Services stood at EUR 3.4 (3.0) billion. Scania improved its operating profit to EUR 370 (301) million. Increasing vehicle sales, an improved parts and service business as well as the favorable exchange rate trend more than offset the negative impact of cost increases.
MAN Commercial Vehicles recorded sales revenue of EUR 3.0 (2.8) billion in the reporting period. Operating profit increased, mainly due to volume effects, to EUR 115 (83) million.
Power Engineering generated sales revenue of EUR 891 (766) million in the first three months of 2019. The operating profit decreased to EUR 9 (21) million.
In the first three months of the current fiscal year, the operating profit at Volkswagen Financial Services rose to EUR 638 (608) million.
Decline in Automotive Division’s net liquidity due to IFRS 16
At the end of March 2019, net liquidity in the Automotive Division stood at EUR 16.0 billion. The recognition of lease liabilities as financial liabilities required by the new IFRS 16 since January 1, 2019, led to a EUR 5.1 billion increase in third-party borrowings in the Automotive Division as of March 31, 2019. As a result of this non-cash effect, the Automotive Division’s net liquidity of EUR 19.4 billion was down significantly on the figure reported as of December 31, 2018.
Volkswagen continues to expect that deliveries to customers of the Volkswagen Group in 2019 will slightly exceed the prior-year figure amid continuously challenging market conditions. Challenges will arise particularly from the economic situation, the increasing intensity of competition, exchange rate volatility and stricter WLTP requirements. Volkswagen still estimates that sales revenue for the Volkswagen Group may be up by as much as 5 percent on the prior-year figure. In terms of the operating profit before special items for the Group and the Passenger Cars Business Area, we forecast an operating return on sales in the range of 6.5–7.5 percent in 2019. An operating return on sales of between 6.0 and 7.0 percent is anticipated for the Commercial Vehicles Business Area. In the Power Engineering Business Area, a loss around the previous year’s level amid a slight rise in sales revenue is expected. The forecast for the Financial Services Division calls for a moderate increase in sales revenues and an operating profit at the prior-year level. Including special items, the operating return on sales is expected to fall at the lower end of the expected range for both the Group and the Passenger Cars Business Area.
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